What are the rights of a business in the charge back process?

We get many questions about charge backs and what the rights are for a business in the Credit Card charge process.

Unfortunately for business owners, the Credit Card processor is only a middleman in the movement of funds from a consumer’s bank and a business account.

If a consumer reports a charge as "Fraud", they are automatically protected against any damage by the FTC and Federal Law. Certain processors like PayPal and Chase Merchant Services are better at educating new businesses about their rights in the event of fraud, but they still have to abide by the Consumer Protection Act. When a fraud notice is posted, they will withdraw the funds from the business and post them back to the consumer’s card.

https://www.consumer.ftc.gov/articles/0216-protecting-against-credit-card-fraud

Even with proof of delivery and solid evidence of the purchase, consumer fraud is protected under this federal law. Business owners need to understand they are ultimately responsible for verifying all charges are not fraudulent and if they are, they are obligated to pay back the consumer. There is NO law to protect the business and there is no type of insurance for this kind of damage. Education is limited on how the flow of funds work so make sure your business takes advantage of everything your bank and CC processor offer to reduce fraud charges.

We tell our clients “The money has to come from somewhere and guess where that is…The business owner”.

Business owners do have the recourse to take a consumer to court or small claims court if they feel the charge is valid but remember, the consumer has the protection of Federal Law. Some consumers have been known to abuse the system but it is very uncommon.

Our fraud protection system does more good than harm but understand as a business owner, whenever you take a Credit Card for payment, you are liable for a charge back for up to 6 months. Here are simple steps to protect your company.

1.Use all verification systems offered by your Credit Card processor. At a minimum use Address Match, CCV verification, and match shipping address to billing address. It any of these don’t match, hold the order.

2.Call to verify all “suspicious” orders. Usually fraud attempts use a temporary phone number and will not answer if called. Listen for strange messages or ask them to verify all the shipping details if someone answers. NEVER read them their name and shipping address, ask them to verify the order and details to you. You will see they can’t. Criminals use so many names and addresses they can’t keep track of all the charges.

3.Google map the order. Many criminals will have you ship to a freight forwarder where they will ship the good overseas. Others use a vacant lot and will meet the shipping truck for delivery. If the address looks suspicious, don’t ship.

4.Google the Name in the order or the company. Also type in the email extension to see if it’s a real website. We often see fraud attempts use domain emails are used like these real examples. work@holding7th.com, service@cleanandry.com, tech@northerneast.com. Once we entered the Domain part of the email into a browser, it came back as not a valid domain or 404 error. After a quick call, it was confirmed it was fraud.

5.If fraud is suspected, immediately reverse the order and DO NOT charge the customer.

Good luck and remember to use other systems like Positive Pay to protect against check fraud as well.